Merchants are gearing up for Black Friday, which this year falls on November 29. A key focus is meeting the demands of customers opting for omnichannel shopping and alternative payments like point-of-sale (POS) financing. This article exploresBlack Friday trends and how merchants can enhance the customer experience through POS financing.
Key article takeaways
Black Friday 2024 sales are projected to surpass $222 billion. Shoppers using POS financing are expected to spend significantly more than buyers using traditional payment methods.
78% of merchants recognize POS financing as a strategic priority with enhancing the omnichannel customer experience being a top priority.
A seamless POS financing solution should integrate effortlessly across all sales channels. Additionally, it should support a broad lending network and leverage waterfall financing to boost approval rates. The platform should simplify management through real-time data and automated processes.
Key 2023 Black Friday statistics
Despite inflationary pressures, Black Friday consumer spending continues to grow. In 2023:
U.S. retail sales on Black Friday rose by 2.5% year-over-year. This reflects steady consumer demand across both in-store and online channels, (Mastercard).
U.S. online sales on Black Friday surged to a record-breaking $9.8 billion in 2023. This reflects a 7.5% increase compared to the previous year (PYMNTS).
In-store Black Friday shopping rose by 1.5% year-over-year. Despite the growth of online sales, most purchases are made in person (Pew Research).
If these trends continue, we can expect even greater synergy between digital and physical retail experiences. Omnichannel strategies will become essential for merchants to capture shoppers whether they are online, in-store, or combining both.
Black Friday’s sales figures provide insights into the nation’s economic trajectory, consumer confidence, and spending patterns. In 2023:
The average holiday shopper spent approximately $533. Those who opted for POS financing options spent 48% more than shoppers using traditional payment methods (PYMNTS).
POS financing usage grew by 72% in the week leading up to Black Friday (PYMNTS).
According to Adobe Analytics, POS financing on Black Friday 2023 saw a 47% increase compared to 2022 (Business Insider)
These trends highlight the growing importance of POS financing to buyers. They also explain why merchants lean towards a waterfall financing model, which offers choice and personalization to customers.
How to implement the best POS financing solution
Despite the rising demand for point-of-sale financing, many retailers still offer fragmented solutions. This results in a disjointed customer experience and complicates management processes. Recognizing the critical role of financing in driving sales, 78% of merchants state that point-of-sale financing is a strategic priority for the next 12 months (ChargeAfter). When upgrading POS lending capabilities, merchants’ top priorities center around the omnichannel customer experience. 40% prioritize improving in-store functionality and 37% aim to optimize the overall customer journey. To achieve this, they need to find a solution that incorporates the following capabilities.
Network of lenders
Shoppers expect unprecedented levels of choice, personalization, and convenience. To achieve comprehensive financing at the point of sale, merchants must offer options from multiple lenders. This allows them to cover the full credit spectrum—prime, near-prime, and no-credit-required—while providing a range of financing products, from installments to revolving credit and lease-to-own, across multiple geographies. Additionally, the broader your lender network, the better protected you are from disruptions caused by changes made by individual lenders.
Waterfall finance capabilities
Waterfall financing is a process where shoppers apply for financing with a single application, and are evaluated according to a tiered system to match them with the best-fit financing choices. First, they are assessed by prime lenders, if they are not approved, their application instantly flows to near-prime lenders, and then to subprime lenders or lease-to-own providers. This happens in real-time and ensures more customers have access to financing, leading to up to 85% approval rates.
Simple management and data processes
Implementing a seamless POS financing solution goes beyond offering diverse payment options—it’s also about simplifying management. Merchants need a solution that integrates effortlessly across in-store, eCommerce, call center, and even in-home environments. Look for platforms that support fast integration with major eCommerce platforms, offer flexible in-store solutions like QR code scanning and self-checkout, and provide API and SDK kits to personalize the online checkout experience.
Additionally, for merchants, real-time updates on financing performance, order information, and customer engagement are essential. A well-designed solution should offer features like automated post-sale management, including dispute resolution, refunds, and reconciliation, as well as data and analytics. This ensures that retailers not only streamline their sales processes but also have direct access to insights that help optimize their financing programs over time.
About Kevin Lawrence VP Global Lender Relations – Kevin has worked in the banking and finance industry for over a decade. He has worked closely with some of North America’s largest banks, financial institutions, and retailers. Kevin is an expert in embedded consumer financing and B2B financing. He has a deep understanding of current trends and where the industry is heading.
For merchants selling to business customers, offering a robust point-of-sale B2B financing offer leads to improved customer acquisition, customer retention, and business growth. Traditionally, retailers have struggled to provide financing options that meet the needs of small and medium-sized business customers, as most B2B financing providers offer net terms that are only suitable for large companies. However, this is changing.
What’s changing in point-of-sale B2B financing
Point-of-sale B2B financing is undergoing a transformation, driven by technological advancements and the emergence of fintech lenders who are addressing the unique needs of SMBs. Unlike traditional financing providers that offer limited and inflexible terms, these new entrants provide more adaptable and accessible financing solutions. SMBs seek terms that extend to 12 months, and beyond. They want to apply and buy quickly with instant credit decisions that reflect their experience as individual consumers. New players such as Credit Key and Tabit present such an opportunity. When integrated into an embedded lending platform, such as ChargeAfter, they enable merchants to seamlessly offer SMBs access to the capital they need to grow and compete more effectively right at the point of sale.
“B2B transactions have many unique requirements including split shipments, customer-specific pricing, invoicing, in-house lines of credit, and flexible payment terms. Combine that with a complex omni-channel experience and manual approval processes that depend on legacy systems, and you have a recipe for a massive delta in customer experience expectations. Through our partnership with ChargeAfter, merchants can provide the B2C experience that customers expect for their B2B customers in ALL of their sales channels.” James R Wallen, Vice President of Sales, Credit Key
There are specific challenges in B2B financing that make it difficult to provide, especially to smaller businesses. Understanding these complexities emphasizes how valuable it is when retailers get it right.
Larger and more complex transactions: B2B transactions often involve bulk purchases, customer-specific pricing, split shipments, unique invoice requirements, and integrations to back office and ERP systems.
Use of traditional credit and financing options: Many businesses rely on familiar, traditional payment options such as Net Terms which are ubiquitous in B2B, overlooking innovative funding solutions, which dramatically increase revenue and share of wallet to the merchant
Longer risk and compliance assessment processes: Assessing business creditworthiness is more intricate and time-consuming than evaluating individual credit scores. Data that is available to assess risk for small and medium-sized businesses is limited and fragmented leading to long, cumbersome processes to open a new account.
“Business owners expect a seamless customer journey, mirroring their experiences as customers. This includes access to point-of-sale financing solutions suitable for different types of businesses at the point-of-sale.” Elias Beaino, Executive Vice President of Tabit by Merchant Growth.
Benefits of advanced B2B financing solutions
There are many benefits to meeting the needs of SMB customers, they include:
Enhanced customer acquisition and retention: By offering flexible financing options, merchants can attract more business customers who might otherwise be unable to afford large purchases upfront. This not only boosts customer acquisition but also fosters loyalty, as customers appreciate the support in managing their cash flow.
Increased sales and revenue: With better financing options, SMBs are more likely to make larger purchases, thereby increasing the average transaction value. This translates to higher sales and revenue for merchants.
Streamlined operations: Modern B2B financing solutions often come with integrated platforms that automate and simplify the financing process. This reduces the administrative burden on merchants and allows them to focus more on their core business activities.
Improved cash flow management: For SMBs, managing cash flow is crucial. By using the lender’s funds to purchase inventory, merchants can preserve their working capital for other essential business operations, such as marketing, hiring staff, or expanding their business, ensuring they can maintain operations without financial strain.
The easiest and most efficient way to offer lending options to your business customers is through an embedded lending platform. With a platform-first approach, retailers easily manage their entire point-of-sale financing offer customized for businesses as well as for their individual customers in a single platform. Benefits of a platform-first approach to point-of-sale B2B financing include:
Fast access to multiple B2B and B2C financing options.
Centralized management of lending and post-sales activities.
Embedded regulatory and compliance requirements.
Customizable point-of-sale checkout with white labeling.
Enhanced customer and lender relationships.
Improved approval rates, sales conversion, and order value.
The transformation within the B2B financing sector is driven by the adoption of new technologies, innovative market players, and customer-centric solutions. These advancements streamline processes and introduce greater flexibility and efficiency. Embracing these changes allows businesses to enhance financial strategies, improve customer relations, and secure a sustainable competitive advantage.
Kevin has worked in the banking and finance industry for over a decade. He has worked closely with some of North America’s largest banks, financial institutions, and retailers. Kevin is an expert in embedded consumer financing and B2B financing and has a deep understanding of current trends and where the industry is heading.
In recent years, POS financing has emerged as a game changer, enabling merchants to meet the demand for flexible financing solutions embedded within the purchasing journey. This growing demand is a result of multiple factors, including the emergence of new fintech lenders that have entered the market with competitive terms, a challenging economy for consumers, and younger Americans rejecting credit cards.
This next wave of credit not only enhances consumers’ purchasing power but also opens new strategic avenues for merchants to increase sales and foster customer loyalty. With various POS financing solutions available, understanding and integrating suitable options can significantly impact your sales strategy.
What is POS financing?
POS financing, or point-of-sale financing, refers to lending options available to customers at their moment of need in the purchasing process. Unlike traditional financing, which often involves lengthy application processes and extensive paperwork, POS lending offers instant loan approvals directly at checkout, bridging the gap between customer desire and purchase capability.
Types of POS Financing
The landscape of POS financing is diverse, offering several tailored options to meet the varied needs of businesses and consumers. POS financing covers different types of lending products that cover the full credit spectrum. Merchants that want to provide their customers with a robust POS financing experience embed different types of financing options into their points of sale to increase approval rates to up to 85%.
0% APR Financing
0% APR programs allow customers to make purchases without incurring any interest during a specified period making them an appealing financing option. Consumers can buy a product immediately and pay back the cost over time, but unlike traditional loans, they are not charged any interest, provided the repayment is completed within the agreed timeframe. This type of financing is particularly beneficial for purchasing big ticket items, as it makes them more financially accessible and manageable for the consumer. Retailers often use 0% APR offers as an incentive to encourage higher sales and attract budget-conscious customers, enhancing both the affordability of their products and the attractiveness of their sales proposition. By offering a cost-effective way to spread out payments, 0% APR loans at the point of sale can significantly improve the purchasing power of consumers, while simultaneously driving business growth and customer loyalty.
Consumer BNPL (Buy Now, Pay Later)
Buy Now, Pay Later (BNPL) is a flexible payment solution that has revolutionized the retail industry in recent years. BNPL allows consumers to divide the total purchase price into smaller, more manageable installments, often with the initial payment due at the time of purchase and the rest spread over a short period. The key appeal of BNPL lies in its accessibility and convenience: customers can acquire goods immediately, from everyday items to more substantial purchases, without the upfront financial burden. This method is especially attractive for those who need or want products immediately but prefer not to exhaust their savings or use traditional credit options. For retailers, offering BNPL can significantly boost sales, attract a broader customer base, and improve customer satisfaction by providing a flexible and customer-friendly payment alternative. By aligning with modern spending habits and offering immediate gratification with delayed payment, BNPL is a powerful tool for enhancing both consumer purchasing power and business growth.
Business BNPL
B2B financing, tailored specifically for business-to-business transactions, plays a crucial role in smoothing the financial interactions between companies. This form of financing addresses the unique needs of businesses, offering them more flexible payment terms and credit options for purchasing goods or services. B2B financing often involves larger purchases and repayment periods ranging from 30 days to 12 months or more. It is designed to enhance cash flow management for both buyers and sellers, enabling businesses to maintain operational efficiency without the immediate financial strain of large purchases. This can be particularly beneficial for smaller businesses that may not have extensive capital reserves. By facilitating easier and more manageable trade, B2B financing strengthens business relationships, fosters long-term collaboration, and supports the overall growth and stability of the business ecosystem. For companies looking to invest in equipment, inventory, or services to expand their operations, B2B financing offers a vital resource to achieve these goals without disrupting their financial health.
Lease-to-Own
Lease-to-own is an innovative payment solution that blends elements of leasing and purchasing, offering consumers and businesses a flexible pathway to ownership. This option allows customers to lease a product—often electronics, furniture, or appliances—for a set period, with the opportunity to purchase the item at the end of the lease term. During the leasing period, customers make regular payments, similar to a rental agreement, but with the added advantage of having the option to own the product outright eventually. This arrangement is particularly appealing for those who need immediate use of an item but may not have the funds for a full purchase upfront or are uncertain about committing to a direct purchase. It’s also beneficial for products that rapidly evolve or depreciate, like technology gadgets, where consumers might prefer to test or use the product before deciding on a full investment. For retailers, offering lease-to-own options can attract a wider range of customers, including those who are credit challenged, and can lead to increased sales, customer loyalty, and market reach. This purchasing method not only enhances accessibility to products but also provides consumers with the financial flexibility to manage their budgets effectively while enjoying the benefits of the leased items.
Installment loans
Installment loans offer a robust financing solution for consumers and businesses making big-ticket purchases, allowing them to spread the cost over an extended period. This type of loan is particularly suited for high-value one-time purchases such as fitness equipment, elective medical procedures and home improvement projects, where paying the full price upfront can be financially daunting. With long-term installment loans, the total cost is divided into smaller, manageable payments, typically made monthly. This approach not only makes expensive purchases more accessible but also helps in budgeting and financial planning, as repayments are predictable and spread out over time. The extended duration of these loans, which can range from 6 months to several years, reduces the monthly financial burden on the borrower, making it easier to manage alongside other financial commitments. For retailers, practitioners and contractors, offering long-term installment loans can broaden their customer base to include those who prefer or require a more extended repayment plan. It’s an effective strategy to increase sales of higher-priced items while also building customer trust and loyalty, as it demonstrates a commitment to providing flexible financial solutions. By accommodating the diverse financial situations of customers, installment loans play a pivotal role in making significant investments more attainable and financially sustainable.
Revolving line of credit
Revolving lines of credit (revolving credit) offer a dynamic and flexible financing option, particularly useful for consumers and businesses seeking repeat purchases. Unlike traditional loans with a fixed amount and a set repayment schedule, a revolving line of credit provides a predetermined credit limit that customers can draw from, repay, and reuse as needed. This flexibility is key: it allows users to borrow exactly what they need, when they need it, up to the limit of the credit line. Interest is typically charged only on the amount borrowed, not on the entire credit limit, making it a cost-effective option for managing fluctuating financial needs.
Retailers and service providers offering a revolving line of credit can enhance customer loyalty by providing a reliable, reusable financial resource. This not only improves the customer experience by offering financial flexibility but also encourages repeat transactions, as the ease of access to credit can facilitate ongoing purchasing decisions. By aligning with the financial needs and preferences of customers, revolving lines of credit represent a versatile and strategic approach to consumer and business financing.
Choosing the right POS financing option
When selecting the right type of POS financing for your customers, it’s crucial to consider their specific needs, purchasing behaviors, and the nature of your products or services. Start by analyzing your customer base: Are they typically making large, one-time purchases, or do they prefer smaller, recurring transactions? Understanding this dynamic helps in choosing between options like BNPL for immediate, smaller purchases or long-term installment loans for big ticket items. Additionally, consider the speed and convenience of the application process, as this can greatly influence customer satisfaction. For businesses, B2B financing might be more appropriate, while consumers might prefer the flexibility of lease-to-own options for certain goods. The key to a successful POS financing strategy lies in offering a range of options to cater to diverse customer needs.
Adopting a platform-first approach is highly effective in this context. By integrating a POS lending platform, you can embed multiple financing options into your point of sale. This not only provides customers with a variety of choices but also streamlines the financing process, making it more efficient and user-friendly. Such a system allows for a seamless combination of different financing methods, such as revolving credit lines for larger purchases and BNPL for smaller purchases, ensuring that each customer finds a solution that best fits their financial situation. Ultimately, a platform-first approach offers the flexibility and adaptability needed to meet the evolving demands of both your business and your customers, leading to enhanced customer satisfaction and potentially higher sales volumes.
Future of POS financing
The future of POS financing is to empower the consumer to make purchases at the point of decision, whenever and wherever that might occur.. The increasing shift towards omnichannel, digital, and mobile platforms, will likely lead to more integrated and user-friendly POS financing options within online and in-person and even combined shopping experiences. Additionally, there’s a potential for diversification in financing options, such as the incorporation of flexible payment plans tailored to individual consumer needs or the introduction of new financing models that could include more peer-to-peer elements or blockchain technology.
Another important trend is the growing consumer demand for transparency and simplicity in financing. This could lead to more straightforward, easy-to-understand financing options with clear terms and conditions, catering to a market that values financial clarity. Furthermore, the rising emphasis on financial inclusivity might drive the expansion of POS financing to cover a broader range of products and services, making it accessible to a wider segment of the population.
Finally, regulatory changes and an increased focus on consumer protection could shape the future of POS financing, potentially leading to more standardized practices across the industry. These changes will not only enhance the customer experience but also provide businesses with new opportunities to innovate in their sales and financing strategies, ensuring that POS financing remains a vital component in the evolving landscape of consumer purchasing.
Conclusion
In conclusion, POS financing has evolved to a multiple-lender model, employing the concept of waterfall financing within an embedded lending platform. This innovative approach will revolutionize the way businesses and consumers interact with financing options. By integrating a variety of lenders into a single, seamless platform, merchants can offer a more diverse range of financing solutions, ensuring that there’s a fit for every customer’s unique financial situation. The waterfall financing aspect further enhances this model, as it systematically routes customer applications through different lenders based on predefined criteria, thereby increasing approval rates and providing customers with the best possible financing terms. This embedded lending platform not only simplifies the financing process for customers but also for merchants who benefit from a single platform for all their POS financing management. Looking ahead, the adoption of a comprehensive, customer-centric approach in POS financing will be a key driver in the evolution of consumer purchasing experiences, marking a leap forward in the intersection of finance and retail.
Kevin has worked in the banking and finance industry for over a decade. He has worked closely with some of North America’s largest banks, financial institutions, and retailers. Kevin is an expert in embedded consumer financing and B2B financing and has a deep understanding of current trends and where the industry is heading.
When it comes to evaluating a POS lender for your business, merchants, service providers, and contractors typically focus on two metrics – approval rates and cost.
Pricing is straightforward to assess, but what about approval rates? Are they a reliable metric for comparing financing programs?
While approval rates are essential, they are only part of the story. If upgrading your point-of-sale financing experience is on your agenda, there are additional factors that you should consider to evaluate finance providers uniformly.
POS financing approval rates
Approval amount
Loan terms & conditions
Does the financing amount offered meet the sale amount
A summary of each is provided below.
POS Financing Approval Rates
What does it mean if a point-of-sale finance provider indicates they have an approval rate of 80%? Are they referring to ecommerce applications? Perhaps they are talking about in-person or in-store applications. The consumer finance provider likely has different underwriting strategies for each channel that affect approval rates for that channel. Given this complexity, a better indicator would be approval percentages by consumer fico tier and channel(s) as appropriate.
Approval Amount
Another important factor when selecting a consumer lending partner is whether their minimum and maximum loan amounts align with your ticket requirement. For example, if your average ticket is less than $300, you are probably focused on BNPL providers. If the average ticket is $3,000, deferred interest options like 0% interest and extended terms will be critical.
Loan Terms & Promotions
The most popular POS lenders bring extra value to the table beyond just cost, approval rates and approval amounts. These providers act as a cousultant and advise you about trends and best practices in consumer finance. Consider the added value of a partner that can explain the benefits of a deferred interest program versus equal payments with no interest or why installment loans might be better than revolving lines of credit for your customers.
Financing Offered Meets the Sale Amount
This is one of the most critical, but often overlooked, metrics when choosing the best lending partner for your business.
You need to understand the percentage of the lender loan offers that equals or exceeds the purchase amount requirement. Having a high approval rate is great, but what good is a loan offer that doesn’t allow the consumer to make the purchase? For example, how helpful is it to offer your customers a $1,500 loan when trying to sell a treadmill for $2,500?
Purchase Conversion Rate
The Purchase Conversion Rate is arguably the most important metric and answers whether a finance program will drive sales.
The conversion rate is the percentage of offers accepted by the consumer and utilized to make a purchase. Factors that impact conversion rate can include:
Is the consumer redirected from the merchant website to apply?
Is there a seamless transition from one program to another if the consumer is declined?
Are the repayment terms and conditions agreeable?
If the consumer experiences friction anywhere in the purchase process, they are more likely to drop out and abandon the cart. A seamless customer journey with agreeable terms and conditions is more likely to result in a purchase.
The Embedded Lending Platform Advantage
One of the major advantages of ChargeAfter’s embedded lending platform is the ability to provide merchants with these analytics and much more. Merchants can view the performance of each lending partner in a single console and on a near real-time basis.
With this data, merchants are empowered with the tools they need to better evaluate the performance and effectiveness of their lending partners, identify any gaps in consumer coverage, evaluate new promotion offers, and even perform A-B testing with various lenders.
ChargeAfter operates the largest network of lending partners offering installment loans, private label credit cards, revolving lines of credit, BNPL, subprime lending, lease-to-own, and even B2B financing. A single integration with ChargeAfter provides you with access to all of the programs and tools you need to maximize finance penetration.
Kevin has worked in the banking and finance industry for over a decade. He has worked closely with some of North America’s largest banks, financial institutions, and retailers. Kevin is an expert in embedded consumer financing and B2B financing and has a deep understanding of current trends and where the industry is heading.
